OPEC+ has announced another boost to oil supply, agreeing to increase quotas by 188,000 barrels per day (bpd) starting in August. This marks the fifth consecutive month of output hikes, following similar increases in June and July. This decision comes as global oil prices have fallen to around $72 per barrel for Brent crude, a return to pre-war levels before the conflict on February 28, thanks in part to the gradual reopening of the Strait of Hormuz for oil exports. The group's total output in May was 33.13 million bpd, down from 42.77 million bpd in February, but is now recovering as the strait becomes more accessible.
The recovery of the Strait of Hormuz, a crucial waterway for about a fifth of global oil and gas, has been a key factor in stabilizing global oil markets. Although tanker traffic through the strait was significantly disrupted during the U.S.-Israeli war on Iran, a memorandum of understanding between Washington and Tehran, followed by a U.S. sanctions waiver, has helped restore confidence that supply will return to normal levels. In June, approximately 140 million barrels of crude oil, averaging 4.7 million bpd, were shipped through the strait, a significant increase from the 2 million bpd daily average in May.
Despite the improved export flows and the OPEC+ output increase, challenges persist. While the increase has been largely on paper due to the previous Iranian blockade of the Strait of Hormuz, the improved conditions mean the announced increases now carry more substantive significance. However, analysts note that initial surges in tanker traffic mostly reflect previously stranded vessels leaving the Persian Gulf, and incoming tanker traffic remains more modest. Additionally, the United Arab Emirates has left the OPEC+ alliance, and Iraq has signaled desires for higher quotas, hinting at potential future internal disagreements within the group.
